Solving the NHL lockout with common sense and some simple math

I solved it. Pretty easy. Why the drama?

We are at day number I Don’t Care in the lockout, and we still don’t have a deal to get this season underway. Both sides are being ridiculously stubborn with their demands, and it is pure hatred and disrespect on both sides that prevents cooler heads and common sense from prevailing. The deal that is going to be made is right in front of us, and it has been since August.

The players want 100% of their signed contracts honored. That is a fair request.

The owners want a 50/50 split of HRR. That is a fair request.

Both of these are sticking points for both sides. Both of these are easily obtainable. But here’s the kicker: Both sides agree with the other! So what in the world is holding up a deal?

Timing is holding up a deal. The owners want a 50/50 split immediately, which isn’t possible if they honor all contracts at 100 pennies on the dollar. It’s mathematically impossible actually.

The players say they will go to 50/50, but that won’t happen until Year Four of any offer they have presented to the league. So they both know what will eventually happen. But yet, they can’t (or refuse) to see the common sense deal in front of them.

Gary, Donald, let me show you the deal. It’s quite simple actually. Let’s break it down into steps, it’ll be easier for you to understand. And maybe it’ll get through your thick heads if you see it in steps.

Step One: Freeze NHL Salaries

The NHL pulled in $3.3 billion in revenue last season. Using the previous CBA numbers, the players are entitled to 57% of that, which is $1.89 billion. That $1.89 billion is the sticking point for the players. So give it to them. Let them keep their salaries, but freeze them at this $1.89 billion. As revenues grow, that share drops, and it drops faster than you think.

Step Two: Get to a 50/50 Split

So now that we have step one in place, let’s move on. Step two is getting to the 50/50 split. After you freeze the salaries, it happens relatively quickly. I ran the numbers for you. This happens by Year Three of the deal, assuming a very conservative 5% growth (see below).

Step Three: NHLPA Dips To 49% For Year Four

But Dave, wait a minute. The NHLPA won’t accept that.

Well, it’s called bargaining for a reason. The players will remain over 50% for the first two years of the deal, so in Year Three, when revenues have grown enough that the $1.89 billion becomes less than 50%, let it ride for a year. Not only do the owners get their 50/50 split, but they get one year of 51% of the revenues. That’s an extra $20 million for the owners, it’s a bit of a “give back” if you will.

Step Four: NHLPA Salary Connected to Revenues

We have reached the final step, which is move it back to a 50/50 split, and player salaries are tied to revenues. As revenue grows, player salaries grow. This step is simple, since it’s been in place for the past eight years.

Gary, Donald, I’ve run the numbers for you. Assuming an extremely conservative 5% annual growth in revenues, the players get to 50/50 by Year Three.

 Year Revenue NHLPA NHLPA %
2011-2012  $  3,300,000,000.00  $ 1,890,000,000.00 57%
2012-2013  $  3,465,000,000.00  $ 1,890,000,000.00 55%
2013-2014  $  3,638,250,000.00  $ 1,890,000,000.00 52%
2014-2015  $  3,820,162,500.00  $ 1,890,000,000.00 49%
2014-2015  $  4,011,170,625.00  $ 2,005,585,312.50 50%

Looking at that table above, we use the current numbers (2011-2012), and apply them to the 2012-2013 season. Assuming that the owners see 5% growth, which they will if they have a full season, then this $1.89 billion becomes 55% of HRR.

Salaries are still frozen for Year Two (2013-2014), and assuming that 5% growth, that’s still 52% of revenues. Year Three at those numbers makes the players’ split 49%, which as mentioned above, is a bit of a give back by the players.After that, it’s a 50/50 split.

This is pretty damn simple gentlemen. And guess what? If the revenue grows by 7%, then the players are at 50% by Year Two (numbers below):

 Year Revenue NHLPA NHLPA %
2011-2012  $  3,300,000,000.00  $  1,890,000,000.00 57%
2012-2013  $  3,531,000,000.00  $  1,890,000,000.00 54%
2013-2014  $  3,778,170,000.00  $  1,890,000,000.00 50%
2014-2015  $  4,042,641,900.00  $  2,021,320,950.00 50%
2014-2015  $  4,325,626,833.00  $  2,162,813,416.50 50%

Look at that. A 50/50 split in two years. It took me about 15 minutes to do the math, and another hour to write the post. You’ve been “negotiating” for months. What gives?

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